Living can damage your wealth
The introduction of the National Health Service and Community Care Act 1990 will have considerable implications for any family particularly in the funding of services and nursing/residential care as opposed to the general feeling that families wish to preserve their wealth and hand it down to their family.
The risk of losing the family home and other assets to fund care services at any age is far greater than the threat of Inheritance Tax for most people. Inheritance Tax takes 40% of everything over £325,000 (tax year 2009/2013) on death – Social Services can take into account 100% of everything over £22,250 (£22,00 in Wales) during lifetime to pay for the cost of care.
What is Community Care?
It is estimated that average care home bills will be around £540 a week. The average stay of a person in a care home is four years, so over the average stay costs would come in at around £112,000 per person. One major concern about the care industry is that prices are rising faster than the costs of inflation. It is predicted that within 20 years’ time, care home costs will have risen to over £1,000 a week. This trend in rising costs has come about as inflation has been rising at an average of 2.5% a year, whereas care home fees are rising by 3.5%’
If you have over £22,250 in capital (£22,000 if you live in Wales) you will be assessed as being able to meet the full cost of your care. Your capital will be counted as generating an income according to the following table:
Amount of capital you have
How your capital is used to calculate your contribution to your care home fees
You will be assessed as being able to meet the full cost of your care
Between £13,500 and £22,250
Capital between these amounts will be calculated as providing you with an income of £1 per week for every £250 of your savings
£13,500 or under
Your capital will be ignored in calculating how much you have to contribute to the cost of your care
If you own your home then it will usually be counted as capital 12 weeks after you move permanently into a care home. The value of your home will not be counted as capital if certain close relatives still live there.
No matter how much you have to pay towards your care home fees, you must be left with £21.15 a week (£21.38 if you live in Wales) to spend as you choose. If you get the mobility component of Disability Living Allowance, you will keep getting it. You’ll also get up to £5.25 per week of any savings credit if you are over 65.
Charging for Services
A person provided with residential care services which has been arranged by the local authority will undergo a financial assessment –means test. A person with more than £14,750 in capital or savings will have to pay for care services in full. If they have savings of between £14,750 and £21,000 the local authority contribution will be reduced at the rate of £1.00 for every £250.00 of capital over £14,750. Full local authority support will only be available if there are savings of less than £14,750.
Once savings have been exhausted, the person (or his /her family) requiring care services are forced into a position where they may have to sell the home to continue paying for the charges.
In a financial assessment, most capital is taken into account (e.g.) bank and building society accounts, savings bonds, stocks and share, business assets and a house. Certain capital is excluded (e.g.) any surrender value of a life policies and annuities.
Virtually all income is taken into account including retirement and occupational pensions.
After a financial assessment has been made and the contribution determined, the person requiring residential care services is left with a personal allowance of £19.10 per week £993.20 per annum (2004/05) and reviewed each year. This allowance is for personal expenditure including clothing.
Could you live on £19.10 per week?